ITC Eligibility

[Ethirajan Parthasarathy]

 As per Schedule 1, certain transactions between related parties attract GST even if no consideration is charged. This means entity providing service will have to raise invoice for a certain amount & calculate GST thereon. Let us assume one such invoice is raised by Company “A” to Company “B” for a sum of Rs.1,00,000/- plus 18% GST. Section 16 provides the following condition to be complied with by Company B for taking input tax credit.

“Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed”

It is not clear how Company B will satisfy the above condition when they are not really liable to pay 1,18,000/- to Company A. At the most, they can only pay 18,000/-. I request the experts to give their opinion.

AI Summary

GST Rule 37: ITC Eligibility Confirmed for Related Party Transactions Without Full Payment Under Schedule 1 and Section 16(2) A discussion on Goods and Services Tax (GST) focused on transactions between related parties under Schedule 1, where GST is applicable even without consideration. Company A raised an invoice to Company B for Rs.1,00,000 plus 18% GST. The issue was whether Company B could claim input tax credit (ITC) without actually paying the full amount. Experts clarified that under Rule 37 and the second proviso of Section 16(2), the consideration is deemed paid for Schedule 1 transactions, thus allowing ITC without reversal. The consensus was that Company B is deemed to have satisfied the payment condition for ITC eligibility.